European Fiscal Policy Co-ordination and the Persistent Myth of Stabilization

Erik Jones

Chapter 2 in The Future of EMU, 2009, pp 29-53 from Palgrave Macmillan

Abstract: Abstract The asymmetric constitution of European macroeconomic governance is well known. Monetary policy is made at the European level, while fiscal policy remains the purview of the member states. The pathologies this creates are also well known. Macroeconomic policy is uncoordinated at the European level and fiscal policy is uncoordinated across the member states. The result is almost universally regarded as sub-optimal (Tsoukalis 2005: 161). Better co-ordination of monetary and fiscal policy at the European level could improve aggregate demand management for those countries that have adopted the euro taken as a group (the euro-zone). Better co-ordination of national fiscal policies could also enhance predictability (and reduce negative externalities) in a context of high interdependence and so improve national achievement of national objectives with national fiscal instruments. Alas, the prospects for better co-ordination are slim.

Keywords: Exchange Rate; Monetary Policy; Fiscal Policy; Real Interest Rate; European Central Bank (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-23389-8_3

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DOI: 10.1057/9780230233898_3

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